Author [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] [EN] [ZH] [ES] [PT] [IT] [DE] [FR] [NL] [TR] [SR] [AR] [RU] Topic: "economic analysis of nubits system" compares to bitUSD  (Read 456 times)

Offline toast

"economic analysis of nubits system" compares to bitUSD
« on: November 27, 2014, 09:42:46 PM »

http://discuss.nubits.com/t/my-economic-analysis-of-the-nubits-system/712

This claims he has a justification why bitUSD is supposed to trade below parity in this document. Anyone care to read through it and prepare a response for when he corrects it?
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Offline Markus

  • Sr. Member
  • ****
  • Posts: 366
    • View Profile
Re: "economic analysis of nubits system" compares to bitUSD
« Reply #1 on: November 28, 2014, 10:25:23 AM »
He basically says that the fair value of dollar-tracking assets like BitUSD and NuBit is:
Code: [Select]
Fair Value = 1 USD
+ interest premium vs. USD
+ expected future appreciation (basically how far it is below parity)
- risk of total collapse
+ utility fudge factor (mostly affected by historical volatility, facility of transactions, exchange market depth)

For Nubits he then argues there is no interest premium and since it's trading at parity no expected appreciation, implicitly concluding that Nubit's utility factor must offset it's perceived risk.

For BitUSD he assumes interest premium and risk are comparable to Nubit which leads to this equation:
Code: [Select]
utility of Nubit = utility of BitUSD + expected appreciation of BitUSD
Because in the past BitUSD has been trading at a discount its expected appreciation is larger than zero concluding that its utility must be lower than Nubit's.

What is left when you remove Nubit from the discussion is that
BitUSD trades at a discount because it has a risk that is not offset by utility and there is no expectation that it might appreciate above parity.

I basically agree with that summary (well I wrote it :) ) and would like to propose a fix:

Adjust a BitAsset's shorting threshold according to historical deviation from parity.

For example if BitUSD has been trading at an average of 98 US¢ in the past few weeks allow shorting only at 102% of the feed price or above. I'm not suggesting that this is really urgent but if in a year's time with enough liquidity present the problem persists ...

Offline svk

Re: "economic analysis of nubits system" compares to bitUSD
« Reply #2 on: November 28, 2014, 10:33:48 AM »
He basically says that the fair value of dollar-tracking assets like BitUSD and NuBit is:
Code: [Select]
Fair Value = 1 USD
+ interest premium vs. USD
+ expected future appreciation (basically how far it is below parity)
- risk of total collapse
+ utility fudge factor (mostly affected by historical volatility, facility of transactions, exchange market depth)

For Nubits he then argues there is no interest premium and since it's trading at parity no expected appreciation, implicitly concluding that Nubit's utility factor must offset it's perceived risk.

For BitUSD he assumes interest premium and risk are comparable to Nubit which leads to this equation:
Code: [Select]
utility of Nubit = utility of BitUSD + expected appreciation of BitUSD
Because in the past BitUSD has been trading at a discount its expected appreciation is larger than zero concluding that its utility must be lower than Nubit's.

What is left when you remove Nubit from the discussion is that
BitUSD trades at a discount because it has a risk that is not offset by utility and there is no expectation that it might appreciate above parity.

I basically agree with that summary (well I wrote it :) ) and would like to propose a fix:

Adjust a BitAsset's shorting threshold according to historical deviation from parity.

For example if BitUSD has been trading at an average of 98 US¢ in the past few weeks allow shorting only at 102% of the feed price or above. I'm not suggesting that this is really urgent but if in a year's time with enough liquidity present the problem persists ...

This ignores the fact that bitUSD (and all other market assets) have a non-zero interest premium.
Worker: dev.bitsharesblocks

Offline Markus

  • Sr. Member
  • ****
  • Posts: 366
    • View Profile
Re: "economic analysis of nubits system" compares to bitUSD
« Reply #3 on: November 28, 2014, 10:41:48 AM »
When comparing Nubit and BitUSD the OP (not toast, the other one) says the interest premiums are roughly the same, not that they are zero.

For my final conclusion you would have to factor BitUSD's interest in, yes, but my personal estimate is that it will be negligible. Although I would like to be proven wrong.

Offline btswildpig

  • Hero Member
  • *****
  • Posts: 1404
    • View Profile
Re: "economic analysis of nubits system" compares to bitUSD
« Reply #4 on: November 28, 2014, 02:03:17 PM »
Nubits is a fancy name for "IOU-By-Claimed to be multiple person" .

Just a fancy name for IOU with fancy theories .

A well pegged IOU , just like RMB-symbol from Bter , if they give the issuing right to multiple person , and build a wall for it , and raise interest rate when they don't like people leaving them with money ,  then it's a Nubits.
这个是私人账号,表达的一切言论均不代表任何团队和任何人。This is my personal account , anything I said with this account will be my opinion alone and has nothing to do with any group.

Offline Empirical1.1

  • Hero Member
  • *****
  • Posts: 886
    • View Profile
Re: "economic analysis of nubits system" compares to bitUSD
« Reply #5 on: November 28, 2014, 02:13:07 PM »

What is left when you remove Nubit from the discussion is that
BitUSD trades at a discount because it has a risk that is not offset by utility and there is no expectation that it might appreciate above parity.

I basically agree with that summary (well I wrote it :) ) and would like to propose a fix:

Adjust a BitAsset's shorting threshold according to historical deviation from parity.

For example if BitUSD has been trading at an average of 98 US¢ in the past few weeks allow shorting only at 102% of the feed price or above. I'm not suggesting that this is really urgent but if in a year's time with enough liquidity present the problem persists ...

I have thought that making shorts compete @ 1.01 for BitAsset creation vs. 1-1 might be better.
There is always a big wall at exactly 1.00 so the average peg price will be lower, moving BitUSD creation up to $1.01 seemed to be a possible solution to make the average closer to $1.00 but I don't know.


 I would actually like shorts to compete at the $1.01 level for BitUSD creation vs. the $1 level so that BitUSD... is worth $0.99-$1 vs. $0.98-99


I didn't understand any of the equations Nubits used, I can only do A+B=C. But it seemed they gave both systems a similar failure risk, even though BitUSD is a heavily collateralised system and theirs has very little collateral and relies on a parking premium to incentivise demand. I expect their system will collapse with a significant rise in interest rates, because that signifies a significant fall in demand to the market and only then, do you have to worry about how much interest they can afford to pay and for how long they'll do it before giving up if the system is getting away from them.

If the BitAsset system is stable, decentralised, there is some utility and the interest on BitAssets is good then I could see a situation where they are worth much more than a USD, especially if centralised banking risk factors increase.



zerosum

  • Guest
Re: "economic analysis of nubits system" compares to bitUSD
« Reply #6 on: November 28, 2014, 05:48:24 PM »
http://discuss.nubits.com/t/my-economic-analysis-of-the-nubits-system/712

This claims he has a justification why bitUSD is supposed to trade below parity in this document. Anyone care to read through it and prepare a response for when he corrects it?

He just says what I, sounding like a broken record, have been repeating forever - "Since bitUSD are less useful for txn purposes than USD they must trade at discount".


Now,
- He is wrong that this is a permanent state of bitUSD (i.e. bitUSD has reached its full usefulness).

- Your brain trust attributed bitUSD trading at a discount to a broken peg mechanism and 'fixed' it.

- I believe that he is right for the current state bitUSD, but it will be fixed once bitUSD becomes useful for real transaction and stops being just a play token not yet in use.....




 

Google+